1. P3 for Small and Midsize Governments
How Any Government Entity, Regardless of Size, Can Utilize the Cost Saving Benefits of P3s

2. Nationally recognized not-for-profit
Maximizes public benefit when using P3
Access to Tax-Exempt financing
Issues bonds
Owns the project on behalf of Public Entity until debt is retired
Transfers project at no additional cost to public agency

3. Redmond City Hall
Redmond, WA
Pop. 62,500
$39.2 Million Project

4. UAF Woods Center Food Services University of Alaska Fairbanks, AK
Student Pop. 9,330
$23.6 Million Project

5. Riverside County Courthouse
Indio, CA
Pop. 88,400
$44.38 Million Project

6. Other Examples Patricia Bracelin Steele Building $62,540,000
Radford Court Apartments
$53,125,000
Pacific Place Parking Garage
$47,000,000
King Street Center
$78,275,000
Lake Tapps Parkway
$17,000,000
4225 Roosevelt
$29,858,000
The Gateway at Alhambra
$43,710,000
Issaquah Highlands
$63,500,000
Redmond City Hall
$39,230,000
Bothell City Hall
$49,625,000
Edna Lucile Goodrich Building
$56,805,000
Nordheim Court
$34,085,000

7. What’s challenging about smaller governments?
Typically a Lower project cost
Smaller projects cannot afford higher cost of conventional debt and equity
Smaller projects have little room to accommodate the higher costs of long term O&M packages
Smaller Governments are typically less experienced with complex projects

8. Key Considerations for Public-Private Partnerships in Social Infrastructure
There is no Capital Availability Gap for Social Infrastructure!
The issue, to the extent it exists, is a Revenue Availability or Revenue Allocation issue
P3 for Social Infrastructure builds, leases and then transfers projects to governmental tenants.
To be a successful P3 for Social Infrastructure:
Deliver lower costs, higher quality and greater efficiency.

9. Availability Approach
Two Models
New American Approach
Availability Approach
Ownership
Through an “On-Behalf-Of” not-for-profit
Public ownership with private control
Financing
100% tax exempt debt
Equity and taxable debt
Development
Private build-to-suit; Integrated Delivery with incentives to perform
Operations & Maintenance
Privately delivered, cost-based & subject to performance review.
Dedicated repair and replacement reserve
Private availability-based
Privately delivered and funded through long-term public obligations
Lifecycle Cost
Lowest in the industry
Generally higher to cover availability contracting
Property Tax
Usually exempt
Typically subject to property tax

10. Four Principles How to Maximize Public Benefits in P3 Delivery for Social Infrastructure
Use Tax-Exempt Debt
Use Private Development
Align Risks and Rewards
Understanding the Origins of Value

11. Four Principles: The Use of Tax-Exempt Debt
Tax-Exempt Financing
Taxable Financing
100% Tax Exempt Debt
Combination of Taxable Debt and Equity
Required Debt Coverage Ratio is 1.0
Required Debt Coverage Ratio is 1.1 or higher
A Single Loan
Two Loans – A Construction Loan and then a Permanent Loan
More accepting of Subject to Appropriation and Abatement language
Difficulty with Subject to Appropriation and Abatement language

12. Four Principles: Use of Private Development
Developers Work Efficiently – Time is Money!
Use Incentives to encourage efficiency
In-House Experience
Rely Less on Consultants

13. Four Principles: Alignment of Risks and Rewards
Pay partners fairly for what they bring to the project
Do not pay for what they do not bring to the project
Private partners must be allowed to freely apply their knowledge, skill, management and experience
Keep private property management competitive with short term, performance based O&M contracting.

14. Four Principles: Understand the Origins of Value
As 100% tenant, the public agency lease creates the value allowing the project to move forward.
Rent always = Debt Service + Operations + Maintenance
The contracts allocate risk
Rewards should reflect contributions:
Fees, Benefits, Incentives
Ability to direct operations
Ability to take control of the project

15. Intelligent Lifecycle Costing
Lowest Cost of Money +
Greatest Development Efficiency +
Most Efficient Operations +
Active Maintenance
Intelligent Lifecycle Cost

16. The New American Approach in Eight Steps

17. What to Look For in a Not-for-Profit
The New American Approach: Step 1: Selecting the Not-for-Profit Partner
What to Look For in a Not-for-Profit
Experience in complex real estate development
Experience in tax-exempt bond finance and compliance
Asset management
Property management
Keep in mind the Not-for-Profit is not a contracted consultant and their fee compensation will come from bond proceeds
Public Agency
RFQ/RFP
Not-for-Profit Partner
Not-for-Profit Partner
Not-for-Profit Partner

18. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Issue an RFQ
Identify team members
Ask for their experience on similar projects
Ask for references
Does not ask for design concepts or costs
Public Agency
Not-for-Profit Partner
RFQ/RFP

19. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Issue an RFP for the Development Team
Who are the Team Members
What are their time commitments & experience on similar projects?
How does the team expect to create public value?
Will they accept the terms of the pre-development agreement and the development agreement?
Ask for them to bid all fees and soft costs based on an assumed per square foot hard cost.
Ask them to confidentially provide financial information and litigation history.
Public Agency
Not-for-Profit Partner
RFQ/RFP

20. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Public Agency
Not-for-Profit Partner
RFQ/RFP
Do Not ask for Architectural Renderings!

21. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Digging Further
Interview the Teams
Also conduct separate interviews for each team member
Visit their projects
Examine their financials and litigation record in the team’s offices
Interview other Public Agencies
Public Agency
Not-for-Profit Partner
RFQ/RFP

22. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Public Agency
Not-for-Profit Partner
Development Team
RFQ/RFP
Developer
Development Team
General Contractor
Architect
Development Team
Developer
General Contractor
Architect
Developer
General Contractor
Architect

23. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Public Agency
Not-for-Profit Partner
Developer
Architect
General Contractor
Development Team

24. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team
Public Agency
Not-for-Profit Partner
Development Team
Developer
General Contractor
Architect

25. OR

26. The New American Approach: Step 1: Issuing the RFP
Public Agency
RFQ/RFP

27. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team and Not-for-Profit Partner
Public Agency
Development Team
RFQ/RFP
Developer
Development Team
General Contractor
Architect
Development Team
Developer
General Contractor
Architect
Developer
Not-for-Profit Partner
General Contractor
Architect

28. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team and Not-for-Profit Partner
Public Agency
Development Team
Developer
General Contractor
Architect
Not-for-Profit Partner

29. Not-for-Profit Partner
The New American Approach: Step 2: Selecting the Private Development Team and Not-for-Profit Partner
Public Agency
Development Team
Developer
General Contractor
Architect
Not-for-Profit Partner

30. The New American Approach: Step 3: Design and Predevelopment
Pre-Development Agreement
Public Agency
Not-for-Profit Partner
Development Team
Developer
Architect
General Contractor

31. The New American Approach: Step 3: Design and Predevelopment
Public Agency
Long Term Lease
Not-for-Profit Partner
GMP
Development Team
Developer
Architect
General Contractor

32. The New American Approach: Step 4: Financing Contracts and Bond Sale
Public Agency
Not-for-Profit Partner
Development Team
Developer
Architect
Development Team
General Contractor

33. The New American Approach: Step 4: Financing Contracts and Bond Sale
Special Purpose Entity
Public Agency
Not-for-Profit Partner
Developer
Architect
Development Team
General Contractor

34. The New American Approach: Step 4: Financing Contracts and Bond Sale
Public Agency
Not-for-Profit Partner
Trustee
Special Purpose Entity
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

35. The New American Approach: Step 5: Construction
Public Agency
Not-for-Profit Partner
Trustee
Special Purpose Entity
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

36. The New American Approach: Step 5: Construction
Public Agency
Not-for-Profit Partner
Trustee
Special Purpose Entity
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

37. The New American Approach: Step 5: Construction
Public Agency
Not-for-Profit Partner
Trustee
Private Property Management
Special Purpose Entity
RFQ/RFP
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

38. The New American Approach: Step 5: Construction
Public Agency
Not-for-Profit Partner
Trustee
Lease
Private Property Management
Special Purpose Entity
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

39. The New American Approach: Step 6: Construction Completion
Public Agency
Not-for-Profit Partner
Trustee
Lease
Private Property Management
Special Purpose Entity
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

40. The New American Approach: Step 7: Operations and Maintenance
Public Agency
Not-for-Profit Partner
Trustee
Lease
Private Property Management
Special Purpose Entity
Bond Underwriter
Developer
Architect
Development Team
Investors
General Contractor

41. The New American Approach: Step 7: Operations and Maintenance
Public Agency
Not-for-Profit Partner
Trustee
Lease
Special Purpose Entity
Bond Underwriter
Every 3-5 years
Investors
Private Property Management

42. The New American Approach: Lease Payments
Public Agency
Not-for-Profit Partner
Trustee
Lease
Special Purpose Entity
Bond Underwriter
Debt Service +
Operating Costs +
Repair and Replacement Reserve
Investors
Private Property Management

43. The New American Approach: Unique Public Safeguards
Public Agency
Not-for-Profit Partner
Lease
Special Purpose Entity
Private Property Management

44. The New American Approach: Step 8: Transfer of Ownership
Public Agency
Not-for-Profit Partner
Trustee
Lease
Special Purpose Entity
Bond Underwriter
Paid in Full
Investors
Private Property Management

45. The New American Approach: Step 8: Transfer of Ownership
Public Agency
Ownership

46. When to use the American Approach
If the Public Agency views the activity as an essential governmental responsibility
If the protections from cost overruns and time delays are important
If lower operating costs are critical
If Specialized development skills are necessary
If long term property maintenance is a concern

47. 63-20 Bonds
Revenue Ruling allows a not-for-profit corporation to issue debt to finance a facility for tax exempt purposes, provided:
A local governmental entity endorses the financing
The facility will be occupied by a governmental or tax exempt entity
The facility reverts to the ownership of the endorsing local governmental entity at the retirement of the debt

48. Questions and Discussion